TNAG-0570-FCO40-703-Planning-paper-on-Hong-Kong-1976 — Page 183

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that growth has resulted in a rapid rise in taxation receipts

(from SM1808 in 1970/71 to an estimated XM3612 in 1975/76);

that political uncertainties require a measure of discount

for foreign and domestic investment; and that in the 1950's

and 1960's there were non-fiscal constraints on the growth of certain kinds of social expenditure. On the other hand,

it is important that self-imposed fiscal limitations should

not unnecessarily restrict implementation of social policies

which are essential for the balanced growth of an industrial

society. It is accepted by the Hong Kong Administration that

there would not be a severe loss of investment if direct

taxation were raised above the 15% limit now payable by any

individual and the 17% payable on Corporation profits; and

that Hong Kong's strength as a commercial, banking and

communications centre would continue to attract investors if

tax rates were somewhat higher. What matters most is that

taxation and revenue and charges of all sorts should produce

enough money for the necessary progress it should be left

to the Hong Kong Government to find it in the light of local

circumstances. The Commission appointed by the Governor

to examine the present tax system should report by the end

of 1976 and future taxation planning can then take its

recommendations into account.

5.

Another dissimilarity between Hong Kong and other

industrial societies has been reluctance to resort to deficit

financing. This in part has its origins in the requirement

to obtain UK approval for borrowing which in the 1950's and

1960's was discouraged. This led to a situation in the past

in which an unusually high percentage of the Government's

capital expenditure was financed from the surplus on current account. Some overseas and local borrowing was undertaken

for the first time last year to cover the deficit then expected

as a result of the fall in revenues due to the recession and

at present some further loans are being negotiated.

For the

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